Meat Industry INSIGHTS Newsletter

990158 McDonald's Q4 Seen on Target

January 25, 1999

Chicago - McDonald's Corp. is not expected to spring any surprises when it reports fourth quarter earnings, but is expected to detail the turnaround of its U.S. operations.

“It'll be really straightforward if you look at the improved performance in the U.S. operations recently,” said Patrick Schumann, an analyst at investment bank Edward Jones. “I would expect that to be the key message.”

In mid-December, the company said its U.S. market share in the key hamburger segment in 1998 rose to a record for the 1990's.

That performance came during a year in which the Oak Brook, Ill. company shook up its top management, launched a cost-cutting effort, reduced its corporate staff for the first time ever and introduced a new cooking system.

Dean Haskell, an analyst at EVEREN Securities, said he expected domestic earnings to be up about 15% for the quarter and international earnings to be up 5% to 10%, for a 9% to 10% average increase over the 1997 fourth quarter.

According to research firm First Call Corp., analysts' consensus estimate is $0.64 per share, compared with $0.58 a year ago, representing about a 10% increase.

Joe Buckley, who follows McDonald's for Bear Stearns, said he was estimating $0.66 per share, excluding charges for the implementation of its “Made for You” kitchen system that was unveiled last March.

He said he expected the charge to be “substantial”, which would signal widespread acceptance of the system by McDonald's franchisees.

In its third quarter earnings report, McDonald's said it expected to “make a significant amount of incentive payments to owner/operators during the fourth quarter,” related to the “Made For You” system.

“I don't expect major surprises -- positive or negative,” said Douglas Christopher, an analyst at Crowell, Weedon & Co. “I think the company's doing a good job running its retail business.”

Schumann said strength in McDonald's core markets like the United States most likely offset some of the weaknesses, whether in Latin America or Asia.

McDonald's has more than 24,000 restaurants around the world, with about half in the United States.

This Article Compliments of...

Iotron Technology Inc.

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